Biotech Not Cratering, Just Deflating

To see where the biotech sector is headed tomorrow, it might be helpful for investors to look back, and more importantly, forget about, the recent past.

The outlook from this perspective is sobering: Biotech valuations are only now beginning to trade below historical levels, despite what seems like a calamitous drop in stock prices. Right, you guessed it: Biotechs could still head lower.

The Amex Biotechnology Index closed Wednesday at 309.32, quite an accomplishment considering that a profit warning from drug-equipment maker Qiagen and a Genentech downgrade sank the index to as low as 290.67 earlier in the day. The drop below the 300 level was noteworthy as a psychological, if not technical, measure of just how badly the sector is performing this year -- down 46% for the year. ...